Why you Need to Start Investing NOW!

Welcome to Part 2!

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson

When most people think about investing, they conjure up the image of a day trader, hedge funds and options traders glued to their monitors filled with complex graphs or the raucous New York Stock Exchange trading floor.

Buy low, sell high. Someone wins, someone loses. Big wins, but also so many, many thunderous losses.

This is also no different than going to the casino and gambling. I’d rather keep my money, thanks!

However, what if I told you – you never have to sell your shares in order to make money? It’s true.

But first, in this post let’s go over the basics.  I’ll touch on 3 topics:

  • The importance of time
  • The power of compounding interest
  • Dollar-cost-averaging

Time

“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” – Peter Lynch

Recessions happen. However, when you invest for dividends you are in it for the long run. Just like the four seasons, after winter spring is just around the corner. the economic cycle starts all over again and markets recover. Just be sure you are still around for when things go back up and you don’t leave when a downturn occurs.

I am not a fortune teller. I can’t tell you when the next recession will happen. The last one was in 2008, 10 years ago. So no matter what, there will be another recession. A mini one or a big one, I don’t know, but it will happen.

Remember, it is not the timing of the market that is important, but the time spent in the market. This will all make sense when we take a look at compounding interest and dollar-cost-averaging next.

The Power of Compounding Interest

What is compounding interest? Sweet and simple, it’s literally interest on the interest. Once your money earns interest and is reinvested, that interest earns interest etc. Compounding on itself – thus compounding interest.

Why is it important? Your money grows faster and faster over time. The more time you allow your interest to compound the quicker you accumulate more money.

Check out this cool illustration over at Direct Investing. They even have a nifty calculator to see how much you can earn over time.

Now, onto dollar-cost-averaging…

Dollar-Cost-Averaging

Yep, more math. But I promise, it is not hard!

All dollar-cost-averaging is, is putting in small amounts of money on a consistent basis (like once a month or once a quarter).

By buying shares in a company slowly, you are in turn buying the stock at different price points. Sometimes high, sometimes low.

Here is a nice example.

If you are putting in the same amount each time, lets say for simplicity sake $100 per month, and the price this month is $50 per share. You will end up buying 2 shares. Next month the price drops to $25, with the same $100, you buy 4 shares. Then the price jumps to $80 by the third month, you only buy 1.25 shares.

After 3 months you would have 7.25 shares and spent $300 total, at an average price of $41.38 per share. If you bought $300 worth at $50 the first month, you would only own 6 shares. At $80 per share, you would own just 3.75 shares! Dollar-cost-averaging can help you buy more shares, which will earn you more dividends in the long run.

If the price is high, you buy less. When the price of the share is low, you buy more. Over time the price at which you purchased your shares averages out to be a bit lower.

Neat, eh? Besides, I really love it when the things are on sale 😉

AND… the cool thing is, if you reinvest your dividends automatically you are already putting dollar-cost-averaging and compounding interest to work! Easy-peasy.

That’s it for this post!

Join me next week for Part 3, where I get into the nuts and bolts of how to buy your first share.

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Why Women Need to Invest

why women need to invest

Why Women Need to Invest…

So, why do women need to invest anyways?

To make our money work for us, instead of us working for money.

Easy to say, right?

Basically, if we don’t do it for ourselves, we should not anticipate that others will do it for us. Whether they be our spouses, government social security or company pensions. Sounds grim? Allow me to go on…

Statistics

Besides this point, there are a few other stats to bring to your attention. Although not all women are the main breadwinners of their family, they control a large portion of the financial decisions that go on in a household. (See debatable stats here) I am of the opinion that those stats are higher particularly if there are children in the household. We yield much of the responsibility of where and how the family income is spent, and therefore should not shrug off our responsibility to wise fiscal management.

Another, but rather sad statistic here in Canada, is that women are more likely to be in ‘low income after tax’ in the later stages of life compared to men. Although the reasons vary for why this is (I can only assume – job type, no pension, child rearing), this stat would hopefully provide more reason for women to invest.

Financial Goals

Generally speaking, as women, we also tend to have different long term goals when it comes to saving and investing. Through my observations, many men tend to focus on #FIRE, or financial independence retire early. That’s not a bad thing, but for most women that might not be the primary concern. I can’t speak for all women, as there are plenty of women interested in #FIRE, however, I am more concerned about the well being of my kids and our quality of life. In my mind, sometimes I think to myself… “Why would I want to retire early? I’m already at home all the time! Let me afford to do something enjoyable.”

As well, I can’t emphasis enough the importance of wanting financial security. Let’s face it, life happens and someone has to deal with it. For example, instead of posting this article yesterday, DH was at the emergency all day for septic bursitis… fun. No limbs lost yet! Real life means a disability, job loss, sick kids, temporary illness, bereavement, care of the elderly… and much of this falls on our shoulders. It also makes our financial situation more precarious. These situations greatly impact our current and future income as women.

So, heck yeah… I want more security and an enjoyable life.

And nothing brings security or being able to afford ‘divertissements’ (French for fun+entertainment) like consistent and varying streams of income. Passive income streams other than working, such as the dividend income I speak of so often that can come from owning stocks (more on this later in Part 3).

When it comes to income, the media likes to talk about the ‘wage gap.’ I’m not here to debate whether it exists or not for women. However, there is no wage gap in dividend investing. The best dividend companies give raises and do not discriminate against individual shareholders because they are women or men.

I could go on about Canada’s pitiful income growth (Rob Carrick wrote an interesting article), inflation and our current purchasing power but I’ll leave that for another day.

If you are a fellow gal reading this, please consider saving and investing as a means to achieving whatever your longterm goals might be. 

Happy investing,
Heather

Join me for Part 2 next week where I will discuss ‘Why You Should Start Investing Now‘ and not wait.

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How to Start Investing…

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Hey Everyone!

The whole purpose of my blog is to get more women investing and bring you along on my investment journey. There is no better way to get more people investing than to show them how it’s done.

Let me help you get your hands on your first share!

To help you achieve this goal, I decided to create a 5 part blog series on how to start investing, with a particular focus on those who may not have a large amount of disposable income or knowledge on where to start. Which is exactly how I started, so have no fear!

In this 5 part series, I will touch on the following topics:

  • Why women need to invest…
  • Why you should start investing NOW…
  • How to buy your first share…
  • How to pick stocks easily and where to put them…
  • Other tips and tricks…

So, without further ado, let’s get this series started!

Happy Investing,
Heather

Note: As I publish each post, I will put a link on this page 🙂

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